Tamil Nadu government has directed all its PSUs, municipal corporations and apex co-operatives to mandatorily participate in the Trade Receivables Discounting System (TReDS) platform for settling bills of their MSME suppliers of goods and services, says a government order.

The State Finance Minister in Budget Speech for 2021-22, announced that “to ensure MSMEs have a faster channels for realisation of their dues, all State PSUs, Statutory Boards, Municipal Corporations and Apex Co-operatives will be mandated to join the TReDS.”

Facilitate immediate payment

TReDS is designed to facilitate immediate payment to MSMEs for the goods and services supplied by them through bill discounting, thus enabling the smooth flow of working capital. Once a seller uploads an invoice on the platform, it goes to the buyer for acceptance.

Once the buyer accepts, the invoice (then called a factoring unit) goes to auction and financial institutions can quote various discounting rates. The amount will get credited to the seller the next working day. Later, the buyer will repay the financier.

TReDS platform operators are authorised by RBI under the Payment and Settlement Systems Act, 2007. At present, there are three authorised operators.

Government agencies including PSUs, are major buyers from MSMEs. Hence, if government agencies get on board on the TReDS, it will fulfil the dual purpose of easy working capital to MSME suppliers as well as signalling to the private sector to use the platform.

The Union government has directed its PSUs to use the TReDS platform. Till date, 175 Central Public Sector Undertakings are on TReDS platform.

The issue of on boarding State government agencies, including Public Sector Undertakings was discussed during the Chief Minister Review Meeting held on July 5, 2021 and it was decided thereon to ensure that MSME have faster channels for realisation of their dues from PSUs.

After careful consideration, the State government directs the following agencies to mandatorily participate in the Trade Receivables Discounting System platform for settling the bills of their MSMEs suppliers of goods and services.

This includes all PSUs and companies where the State government exercises managerial control by appointing its CEO; all municipal corporations. Major Statutory boards like Chennai Metropolitan Water Supply and Sewerage Board, Tamil Nadu Water Supply and Drainage Board, Tamil Nadu Housing Board and Tamil Nadu Urban Habitat Development Board and major Apex Co-operatives like Aavin and Co-optex.

All the above concerned procuring entities shall follow the above orders scrupulously, says the order.